The Washington Post

Stocks Give Up Early Gains As Rising Treasury Yields Reignite Fear

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NEW YORK, June 20 — A surge in Treasury yields rattled Wall Street on Wednesday, forcing stocks to give up early gains and drive down the Dow Jones industrial average more than 140 points.

The Dow fell 146 points, or 1.07 percent, to 13,489.42, after bobbing in and out of positive territory earlier in the day. The Standard & Poor’s 500-stock index declined 20.86, or 1.36 percent, to 1512.84, and the Nasdaq composite index fell 26.80, or 1.02 percent, to 2599.96.

The 10-year Treasury note’s yield rose to 5.15 percent late Wednesday from 5.09 percent late Tuesday, reigniting concern among stock investors that high rates could thwart corporate dealmaking and further injure the limping housing market.

The stock market began reacting to Treasury yields two weeks ago, when the 10-year yield exceeded 5 percent for the first time since last summer. Wall Street had traded more placidly in recent days as yields retreated from last week’s peak of nearly 5.3 percent, but Wednesday’s advance stoked fears that they could resume their climb.

Home Depot’s $22.5 billion stock buyback Wednesday initially lent some support to the market, as did stronger-than-expected quarterly earnings from Morgan Stanley and a retreat in oil prices. But the market eventually caved after investors decided the positive news wasn’t enough to warrant a return to stocks’ record territory.

Trouble at two of Bear Stearns’s hedge funds also weighed on the markets, especially financial firms: Bear Stearns, J.P. Morgan Chase and Merrill Lynch all fell more than 2 percent.

Movers

Home Depot rose $1.76, to $40.03. The Dow component said it will buy back more than a quarter of its shares.

FedEx advanced $1.74, to $109.80, after reporting that its fourth-quarter profit rose 7 percent.

Morgan Stanley fell 48 cents, to $87.32. It posted a strong rise in quarterly profit, but its shares dropped as rest of the financial sector wilted.

Nuveen Investment­s rose $8.98, to $63.14, after the investment manager said it agreed to be acquired by a private-equity group.

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